When Insurers Don’t Pay, Consumers Do 🚫💸
Insurance companies have been shifting their financial responsibilities for weather disasters like hurricanes, tornadoes, and floods onto consumers and taxpayers. According to the Consumer Federation of America (CFA), this growing trend leaves individuals paying the price when insurers fail to step up.
The Study: The Disappearing Weather Catastrophe Risk 🌬️
The CFA released a report titled “The Insurance Industry’s Incredible Disappearing Weather Catastrophe Risk.” This report highlighted:
- Insurers in 11 states (including Alabama, Colorado, Georgia, and Virginia) are seeking homeowner insurance rate increases of 18% or more.
- The impact of these rate hikes would be devastating for homeowners already struggling in a tough economy.
A Call to Action 📢
J. Robert Hunter, CFA’s Director of Insurance and a former insurance commissioner, urged regulators to step in:
“Insurance commissioners should block many of these pending rate increases because they place an unwarranted financial burden on homeowners.”
Hunter also noted that insurers have shifted so much cost to consumers and taxpayers over the last 20 years that they are now overcapitalized, with no valid reason for increasing rates further.
How Are Insurers Saving Money? 💰
While some savings come from legitimate measures like reinsurance and risk diversification, most savings result from cost-shifting. Insurers:
- Increased deductibles: Homeowners now pay significantly more out of pocket.
- Capped payouts: Policies now limit coverage amounts, leaving homeowners exposed.
- Shifted risks to taxpayers: With reduced coverage, taxpayers bear the burden of higher disaster assistance payouts.
Higher Rates and Hidden Tricks 🕵️♂️
Insurers have also raised rates drastically, often using:
- Questionable computer models to justify rate increases.
- Sneaky clauses like the “anti-concurrent causation clause,” which denies wind damage claims if flooding occurred at the same time, even if the wind damage happened first.
- State insurance pools to offload high-risk properties.
The Consumer Impact: Paying More, Getting Less ❄️✨
To illustrate the burden on consumers, the CFA compared costs for a $100,000 home under two major hurricanes:
- Hurricane Andrew (1992): A homeowner with $10,000 in damage paid $500 out of pocket.
- Hurricane Katrina (2005): The same damage with a 5% deductible cost the homeowner $5,000 out of pocket.
Other examples include:
- Electrical upgrades: Fully covered under Andrew, but not under Katrina.
- Wind damage claims: Fully paid under Andrew, but often denied under Katrina if water damage also occurred.
The Bottom Line 🏡📊
When insurance companies shift risks and costs to consumers, families and taxpayers are left holding the bag. It’s crucial for regulators to step in, block unjustified rate increases, and hold insurers accountable for their responsibilities.
Don’t let insurers dodge their duties—stay informed and demand fair treatment! ✌️